The US’s top 100 law firms have capped off a record-breaking five-year run that has seen partner profits soar and combined fees last year hit $64.5bn (£32.4bn), according to the definitive snapshot of the world’s largest legal market.
The American Lawyer’s eagerly-awaited top 100 rankings confirm that the M&A boom of the first half of 2007 has driven the US’s top law firms to record financial results.
Key findings include:
- the most profitable firm, Wachtell Lipton Rosen & Katz, achieved profits per equity partner (PEP) of nearly $5m (£2.51m);
- there are now 19 top 100 firms with PEP of more than $2m (£1m) and 64 firms with PEP of more than $1m (£502,500);
- the top 100 as a whole grew turnover by 13.6%; and
- 12 firms now have turnover of more than $1bn (£502.5m).
Wachtell’s performance came after a 23.6% rise on its 2006 PEP, putting it well ahead of its New York peers. Three other firms achieved PEP in excess of $3m (£1.5m): Manhattan leaders Cravath Swaine & Moore and Sullivan & Cromwell and Los Angeles-based litigation specialist Quinn Emanuel Urquhart Oliver & Hedges.
The latter firm has just launched in London after recruiting a partner from the City arm of Kirkland & Ellis to extend its fast-growing practice into Europe (see Deal Week comment).
As expected, the research from Legal Week’s US sister title, which is published today (1 May), shows that firms that focused on the then-booming private equity market have emerged as stand-out performers.
As such, New York practices Simpson Thacher & Bartlett, Debevoise & Plimpton, Willkie Farr & Gallagher and Proskauer Rose and Boston duo Goodwin Procter and Ropes & Gray all comfortably achieved above-trend revenue growth.
The year was also notable for seeing robust growth from many of the US’s largest law firms, with Skadden Arps Slate Meagher & Flom and Latham & Watkins both achieving 15%-plus top-line growth to break the $2bn (£1bn) barrier for the first time.
Other notable performance include West Coast leader Cooley Godward Kronish, which achieved a 42% hike in PEP, reflecting a robust year for Bay Area firms.
Internationally-committed and expansive national practices generally posted solid results, with White & Case, Shearman & Sterling, Weil Gotshal & Manges and Kirkland mirroring the growth trend of the group as a whole.
Skadden executive partner Robert Sheehan told Legal Week: “A record first half, astounding markets and a strong year overall led to these results. It was busy throughout in litigation and the second half saw growth in corporate restructuring.”
The performance caps a remarkable five-year run for the US’s largest 100 law firms, which has seen PEP jump by $438,000 (£220,000) from 2003 to the 2007 average of $1.3m (£653,000).
However, attention will now focus on the prospects for a more challenging 2008 after the slowdown in the US economy and prolonged credit market turmoil led to a dramatic slump in buy-out activity and structured finance work after the summer.
Many senior US lawyers are predicting a change in their medium term fortunes as firms wrestle with last year’s associate pay hikes, which drove starting salaries in many markets to $160,000 (£80,400).
In addition, the 2007 rankings confirm the recent trend that has seen headline PEP soar ahead of growth in revenue per lawyer (RPL) thanks to sustained cutbacks to equity partnerships. RPL figures also show that a considerable chunk of the revenue gains in 2007 came from a 6.8% rise in headcount, with the top 100 employing a record 77,816 lawyers in total.
Commenting on the market outlook, Sheehan said: “It is not as good as last year. We are flat on our first quarter. The usual growth is not there due to financial market conditions.”
However, White & Case chairman Hugh Verrier remained upbeat, highlighting strong growth prospects in Europe, the Middle East and Asia. He commented: “We set a more conservative budget, recognising that it would be a tough year. [But] so far, we have had a good first quarter.”
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Editors' Blog: 'US results 2007 - high growth, high anxiety'
